Multi Commodity Exchange of India Ltd (MCX) has decided to scrap a proposed preferential allotment, the company said in a stock market disclosure. It had previously deferred the proposal.

This follows a dispute over the proposed allotment, which would have indirectly diluted the percentage holding of Financial Technologies India Ltd (FTIL). FTIL, which is backed by Blackstone, had threatened legal action against MCX as it had not received prior communication for the proposed issue.

The development follows an order by FMC in December that declared FTIL and its promoter Jignesh Shah unfit to operate an exchange in the country, in light of the National Spot Exchange Ltd (NSEL) scam. FMC also directed FTIL—which owns 26 per cent stake in MCX—and Shah to bring down their stake in the exchange to 2 per cent.

Following this, MCX board had also asked its promoter FTIL to cut its stake in line with the FMC order.

Last month FTIL had appointed JM Financial Institutional Securities Limited (JM Financial) as its financial advisor for divestment of stake held in MCX.

In another development, MCX board at its meeting held on April 3, approved the alteration of the main objects clause of the Memorandum of Association (MoA) and the Articles of Association of the company.

This is to amend the rules and process for divestment of shareholders who have been declared as not “fit and proper” by any government, regulatory or legal body, wherein the shareholder shall not be entitled to vote in excess of the shares that he is permitted to hold and shall be responsible to dispose of the excess shares within the prescribed time.

“If he (FTIL) fails to do so (dispose of the excess shares within the prescribed time), he shall be obliged to transfer such excess shares to an escrow account, failing which, the company may take such measures as deem fit including requesting depository/DP to transfer the shares to the escrow account and the company shall dispose of such excess shares in such manner as the board may consider appropriate,” as per the statement.

Private equity firm Blackstone is an investor in both FTIL and MCX. MCX also counts shareholders such as Intel Capital.